Commercial agency agreement (basic template)

Model commercial agency agreement, basic, appointing an agent for a territory or market segment to conduct all sales-related activities on behalf of a principal

Model commercial agency agreement, basic in setup. In this agency agreement, the principal appoints an agent for a certain geographical territory or market segment (of a combination of both), for the sales of the principal’s products or services. This template agency contract is basic in its setup: it contains only the key provisions, with a few clauses that might optionally be included, deleted or elaborated on.

Other than in a distributorship, a commercial agent will generate leads, develop prospective customers, up to having them acquiring the principal’s goods or services. From a legal point of view, the deal closure will be between the principal (as seller or service provider) and the customer directly. The agent is not in between.

This basic agency agreement contains only the basic key provisions necessary for establishing a straightforward agency relationship. The template agency contract does conatin a few clauses making sure that the agent’s obligations be performed by the agent personally (even though the agent may be a legal entity).

Many agency agreements contain a listing of the agent’s duties, sometimes very detailed. This model agency agreement only contains (optionally) a few tasks of what the principal expects from the agent. In tailoring the template, this could be aligned much more closely to the principal’s internal business development processes and standard sales funnel of the principal. It may also be made more explicit for what an agent must not do (without prior approval of the principal). For inspiration on tailoring such listing of an agent’s duties, see the book.

Assuming the agent will operate in a foreign country (on a distance), it may be required that the agent will notify the principal of any infringements of trademarks in the territory or market segment in which the agency is active.

Depending on the nature of the products or services and the anticipated involvement of the agent in the principal’s operations, it may or may not be important to include a confidentiality clause.

Termination of a commercial agency agreement typically triggers the agent’s entitlement to compensation for the goodwill that the agent has developed. While it is useful to provide for a termination compensation calculation mechanism explicitly, the prerequisites of such compensation are heavily influenced by national law. (Typically, a commercial agency aligns closely to an employment relationship, which is also subjected to very national-law-oriented rules.)

Especially in the field of compensation upon terminating an agent, it is important that independent legal advice is sought, probably already at the pre-contractual stage, even though the law of commercial agents is almost invariably mandatory law (so whatever the parties may stipulate, it will anyhow be governed by the applicable law). As a commercial agency approximates an employee-relationship, the choice of law will often largely be ineffective (if not disregarded by a court, in case of disputes).